Payment Processor for Internet Poker Companies Sentenced in Manhattan Federal Court

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Chad Elie, a payment processor who worked with Internet poker companies Pokerstars, Full Tilt Poker, and Absolute Poker (the “poker companies”), was sentenced today by U.S. District Judge Lewis A. Kaplan to five months in prison for his role in a scheme to deceive banks into processing hundreds of millions of dollars in Internet gambling transactions. Elie, who had previously withdrawn all claims to approximately $25 million seized from payment processing accounts linked to him as required by his plea agreement, was further ordered to forfeit $500,000 to the United States. He pled guilty in March 2012 to conspiracy to commit bank fraud and to operate illegal gambling businesses.

According to the superseding information previously filed in Manhattan federal court, the indictment in which Elie was initially charged, other documents filed in the case, and statements made in court:

In late 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act (UIGEA), making it a crime to “knowingly accept” most forms of payment “in connection with the participation of another person in unlawful Internet gambling.” After several Internet gambling businesses withdrew from the U.S. market following the passage of the UIGEA, the poker companies became the top three Internet poker operators continuing to do business in the United States. Because United States banks were largely unwilling to process Internet gambling payments, companies turned to third party payment processors, including Elie, who disguised payments so that they would appear unrelated to online gambling. Elie and others lied to United States banks by claiming that the financial transactions they were processing were for businesses other than Internet poker companies, and they created phony corporations and websites to disguise payments to the poker companies.

Elie served as a payment processor for each of the three poker companies at various times from 2008 through early 2011. For example, in 2008, Elie opened a bank account that he falsely represented would be used to process payments for “payday loans” in order to disguise his processing of transactions for Pokerstars. In the summer of 2009, he opened an account at another bank, falsely claiming that it would be used to process payments for various Internet membership clubs. He then used it to process millions of dollars in payments for the poker companies. When a bank employee questioned Elie about the transactions, he falsely denied that the transactions had anything to do with Internet gambling. Finally, beginning in the fall of 2009 and continuing into early 2011, Elie offered to invest millions of dollars in three failing banks—SunFirst Bank, All American Bank, and New City Bank—in exchange for the banks’ agreements to process Internet poker transactions. All three banks have since been ordered closed by bank regulators.

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In addition to the prison term, Judge Kaplan sentenced Elie to two years of supervised release. The funds Elie was ordered to forfeit may be made available in order to compensate qualifying fraud victims in U.S. v. Pokerstars, et al., 11 Civ. 2564 (LBS).

Elie was originally charged in April 2011 along with 10 other defendants. Seven of the eight defendants arrested in connection with the superseding indictment have now pled guilty, and four of them, including Elie, have been sentenced. The case against Raymond Bitar, the chief executive officer of Full Tilt Poker, who was arrested in July of this year upon his return to the United States, is still pending. The remaining three defendants: Scott Tom, the founder of Absolute Poker; Isai Scheinberg, the founder of Pokerstars; and Paul Tate, a former director of payment processing for Pokerstars—reside outside the United States and are at large. The charges against Bitar, Tom, Scheinberg, and Tate are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Mr. Bharara praised the FBI for its outstanding work in the investigation, which he noted is ongoing. Mr. Bharara also thanked Immigration and Customs Enforcement’s Homeland Security Investigations New York and New Jersey offices for their continued assistance in the investigation.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Arlo Devlin-Brown, Andrew D. Goldstein, Niketh Velamoor, and Nicole Friedlander are in charge of the criminal case, and Assistant U.S. Attorneys Sharon Cohen Levin, Jason Cowley, and Michael Lockard are in charge of related civil money laundering and forfeiture actions.